PROFIT AT the Polish division of AIB, Bank Zachodni WBK (BZWKB), rose in the third quarter as interest income increased, offsetting a drop in fees from asset management.
BZWBK, in which AIB holds a stake of 70.5 per cent, said that net income increased 9 per cent to 247.1 million zloty (€68 million), beating expectations. Bad debt charges doubled to 43.8 million zloty. AIB is forecasting a charge of up to 35 basis points, or 0.35 per cent, for the full year.
Polish banks have benefited from the absence of interest-rate cuts in the third quarter, which helped boost profit margins. This may change as the global credit crisis has forced them to increase interest payments on deposits needed to finance lending.
Zachodni's share price declined 3.6 per cent, giving the bank a market value of 8.5 billion zloty (€2.3 billion). The stock has dropped 54 per cent this year.
Goodbody Stockbrokers said it expected the Polish bank to account for 20 per cent of AIB's pretax profits this year.
BZWBK's net interest income, increased by a third to 429.5 million zloty. Fees dropped 11 per cent to 343.8 million zloty, hurt by a slowdown at the fund business and stock market declines.
AIB said on Wednesday that BZWBK was the only division in the bank expected to have higher costs this year. The bank has opened almost 100 new branches but has stalled further investment to integrate these branches into the bank's 466-strong network.
The bank's cost-income ratio rose to 52.7 per cent from 51.3 per cent a year earlier. Fees at BZWBK fell as the assets of investment funds in Poland dropped to a two-year low in September. - (Additional reporting: Bloomberg)
